Systems and methods for automated matching and conversion of term life insurance policies

ABSTRACT

An exemplary aspect comprises a computer system with a receiving component that receives application information for an insurance policy that extends the term of an existing life insurance product, and is pre-paid for by a third party, the third party to be paid fees based on the customer&#39;s selection of one of a first option providing the customer with the right of first refusal to continue the insurance policy, and a second option providing the third party with the right of first refusal to continue the insurance policy; an underwriting component that determines whether the customer qualifies for the insurance policy; a pricing component that calculates the fees to be paid by the customer to the third party; and a closing component that provides relevant closing documentation for the insurance policy to at least the customer, the insurance company, and the third party.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of application Ser. No. 16/388,317,filed Apr. 18, 2019, now U.S. Pat. No. 10,650,468, which is acontinuation of application Ser. No. 14/476,219, filed Sep. 3, 2014, nowU.S. Pat. No. 10,311,520, which claims priority under 35 U.S.C. 119(e)to U.S. Provisional Patent Application No. 61/873,170, filed Sep. 3,2013, entitled “Systems and Methods for Extending Life InsuranceCoverage for Consumers Own Convertible Term Life Insurance Policies.”The entire contents of the above-referenced applications areincorporated herein by reference.

INTRODUCTION

The present systems and methods relate generally to computer-implementedinsurance products, and more particularly to computer systems andmethods for enabling calculation and optimization of life insurancecoverage for consumers that own convertible term life insurancepolicies.

Generally, the present disclosure relates to a new product that allowsinsureds, preferably age sixty and over, who own convertible term lifeinsurance, the ability to continue their insurance coverage for anadditional period of 5-10 years (or longer, depending on the givenembodiment).

An exemplary embodiment described herein comprises an insurance productallow the above-described class of insureds to accomplish this extensionat significantly less cost than currently available traditional options.For ease of reference, certain examples of the insurance productdescribed herein are referred to as “Term Lifextender” or “TLE”, forease of reference only. These terms are not intended to limit the scopeof the description or of the claims, but are used solely to provide aclear description of certain exemplary embodiments. Likewise, otherterms and abbreviations (such as “TLF”) are used solely to provideclarity and specific examples, and are not intended to limit thedescription or the claims in any manner.

Exemplary embodiments may comprise systems and methods which generallyrelate to existing options available for a consumer to pay for theconversion of term life insurance into flexible premium adjustable lifeinsurance (aka Universal Life). Actuarial principals, underwriting andlife policy cost structures are then applied to create and provide a newproduct.

Many consumers over the age of sixty, for example, who have purchasedterm life insurance earlier in life to meet various insurance needs findthemselves in need of retaining that life insurance for a longer periodof time or, in some cases, for life.

The majority of these term life insurance policies offer a right toconvert to a permanent life insurance policy at the same underwriting(health) class as the original term insurance term policy without havingto re-qualify (undergo new medical underwriting).

However, the premium cost of the conversion policy is often high and,consequently, not affordable. According to LIMRA (Life InsuranceMarketing and Research Association), approximately 1% of term lifeinsurance policies issued in the United States are actually converted topermanent insurance.

Although a consumer has the option of buying new term coverage, thisrequires new medical underwriting. If the consumer's health hasdeclined, the premium for the new term policy may not be affordable.

For insureds whose health has declined and who wish to retain theirinsurance coverage, the systems and methods described herein provide twooptions to extend insurance coverage for an additional period of time(usually 5-10 years) at a cost substantially lower than the optionscurrently available.

An exemplary aspect comprises a computer system having one or moreprocessors and comprising: (a) a receiving component that receiveselectronic data comprising application information from a customer, theapplication being for an insurance policy that extends the term of anexisting convertible term life insurance product, issued by an insurancecompany, for an extended term, and is pre-paid for by a third party, thethird party to be paid fees by the customer at least partly based on thecustomer's selection of one of a first option and a second option, thefirst option providing the customer with the right of first refusal tocontinue the insurance policy upon expiration of the extended term, andthe second option providing the third party with the right of firstrefusal to continue the insurance policy upon expiration of the extendedterm; (b) an underwriting component that analyzes the applicationinformation and determines whether the customer qualifies for theinsurance policy and if so, under what conditions; (c) a pricingcomponent that, when the customer qualifies for the insurance policy,calculates the fees to be paid by the customer to the third party; and(d) a closing component that provides relevant closing documentation forthe insurance policy to at least the customer, the insurance company,and the third party.

In an exemplary embodiment, one or more of the above components areapplication-specific processors. In another embodiment, one or more ofthe above components are specially-programmed general purposeprocessors. In another embodiment, one or more of the above componentsare components of software stored in a non-transitory computer readablemedium.

In various exemplary embodiments: (1) if the customer selects the firstoption, the customer, in order to exercise the right of first refusal,is required to repay premiums paid by the third party, and ownership ofthe insurance policy reverts to the customer upon repayment of thepremiums; (2) the third party makes periodic premium payments, andwherein repayment of the premium payments is secured by a collateralassignment recorded with the insurance company, and payment of the feespaid to the third party is collateralized by a death benefit of theinsurance policy; (3) if the insured customer dies during the termextension period, the third party is repaid the amount of the premiumspaid from a death benefit of the insurance policy, and the insuredcustomer's beneficiaries receive the balance of the death benefit; (4)the insurance policy is issued through a split dollar program; (5) theinsurance policy results from a conversion of the existing convertibleterm life insurance product; (6) ownership of the insurance policy isheld by a trust; and/or (7) the customer is required to pay a higher feefor the first option than for the second option.

Further aspects, details, and embodiments will be apparent from thedrawings and the description below.

BRIEF DESCRIPTION OF THE DRAWINGS

FIGS. 1 and 2 depict exemplary modeled stochastic fund cashflows (basecase scenario).

FIGS. 3 and 4 depict exemplary modeled stochastic fund cashflows (100%default).

FIGS. 5 and 6 depict exemplary modeled stochastic fund cashflows (100%default, 20% mortality improvement).

FIG. 7 depicts exemplary cumulative modeled stochastic fund cashflows(three scenarios).

FIG. 8 depicts an exemplary distribution system.

FIG. 9 depicts an exemplary percentage return to fund on an individualpolicy dependent upon the possible outcomes.

FIG. 10 depicts a flow diagram of closing, cash, and documentationrelated steps and components of an exemplary embodiment.

FIG. 11 depicts an exemplary computer system and network.

FIG. 12 depicts data used in an exemplary term extension feecalculation.

FIG. 13 depicts a flow diagram of sales and policy creation relatedsteps and components of an exemplary embodiment.

FIG. 14 depicts a flow diagram of closing, cash, and documentationrelated steps and components of an exemplary embodiment.

DESCRIPTION OF SELECT EXEMPLARY EMBODIMENTS

For the purpose of promoting an understanding of the principles ofcertain illustrative embodiments, reference will now be made to thedrawings submitted herewith, and specific language will be used todescribe the same. It will, nevertheless, be understood that nolimitation of the scope of the disclosure is thereby intended; anyalterations and further modifications of the described or illustratedembodiments, and any further applications of the principles of thedisclosure as illustrated therein are contemplated as would normallyoccur to one skilled in the art to which the disclosure relates.

Exemplary Definitions

Term Life: A life insurance policy with a level premium for the coverageperiod, typically 10, 15, 20, 25, or 30 years. At the end of the levelterm period, premiums are no longer guaranteed.

Conversion Privilege: An option built into most individual term policiesthat allows the insured to convert to a permanent policy withoutsubmitting new evidence of insurability (medical exam, lab results,etc.). The converted policy is issued at the same underwriting class asthe original term policy. In effect, this option protects the insuredfrom being declined insurance or being charged a higher premium based ona change in health.

Universal Life Insurance: A flexible permanent life insurance policythat allows the policy owner to vary premiums based on the desire forcash savings buildup within the policy.

VBT: VBT is a set of valuation basic mortality tables that shows therate of deaths occurring in a defined population during a selected timeinterval, or survival from birth to a given age. These tables are usedby the life insurance industry to price life insurance policies.

Split Dollar Arrangement: An arrangement between two parties in whichthey agree to split the costs and benefits of a life insurance policy.The policy can be split in several ways—cash value, premiums, deathbenefit, and ownership.

Grantor Trust: A trust that allows the grantor (the individual whoestablishes the trust) to have control over the trust assets and receiveincome that is created from the trust. The grantor trust is often calleda living trust or a revocable trust. A grantor trust is any trust whichis taxed as if owned in whole or in part by the trust's creator.

Insurance Company Current Premium Assumptions: A projection of thenon-guaranteed premiums used for universal life policies determined bytwo primary factors, the interest crediting rate and the cost ofinsurance (COI). While the interest crediting rate typically changes asmarket rates change, the COI, while not guaranteed, rarely changes.

Life Insurance Underwriting: The process of evaluating a potentialinsured's medical risk to determine their rate class. A rate class is amortality pool containing insureds with similar risk factors, rangingfrom Preferred Best (Preferred Plus) for the healthiest insureds toPreferred, Standard, Table 1, 2 . . . 16, after which insureds aredeemed uninsurable.

Life Settlement: The sale of an existing life insurance policy to athird party for more than its cash surrender value, but less than itsnet death benefit.

Mortality Experience: The actual mortality experience of a given groupas compared to the expected or projected mortality experience of thatgroup.

Mortality Improvement: A projection of the expected increase in lifeexpectancy over a period of time.

Monte Carlo Simulations: A problem solving technique used to approximatethe probability of certain outcomes by running multiple trial runs,called simulations, using random variables.

Standard Deviation: Shows how much variation or dispersion from theaverage exists. A low standard deviation indicates that the data pointstend to be very close to the mean (also called expected value); a highstandard deviation indicates that the data points are spread out over alarge range of values.

Stochastic Modeling: A method of modeling in which one or more variableswithin the model are random. Stochastic modeling is for the purpose ofestimating the probability of outcomes within a forecast to predict whatconditions might be like under different situations.

Activities of Daily Living—Bathing, preparing and eating meals, movingfrom room to room, getting into and out of beds or chairs, dressing,using a toilet

Attained Age—Insured's age at a particular time. For example, many termlife insurance policies allow an insured to convert to permanentinsurance without a physical examination at the insured's then attainedage. Upon conversion, the premium usually rises substantially to reflectthe insured's age and diminished life expectancy.

Case Management—A system of coordinating medical services to treat apatient, improve care and reduce cost. A case manager coordinates healthcare delivery for patients.

Casualty—Liability or loss resulting from an accident.

Convertible—Term life insurance coverage that can be converted intopermanent insurance regardless of an insured's physical condition andwithout a medical examination. The individual cannot be denied coverageor charged an additional premium for any health problems

Disease Management—A system of coordinated health-care interventions andcommunications for patients with certain illnesses.

Hazard—A circumstance that increases the likelihood or probable severityof a loss. For example, the storing of explosives in a home basement isa hazard that increases the probability of an explosion

Hazardous Activity—Any risky activity that might increase a person'slikelihood of injury or death. Activities such as bungee jumping, autoracing, or mountain climbing are generally not covered at Standard ratesin insurance policies.

Occurrence—An event that results in an insured loss. In some lines ofbusiness, such as liability, an occurrence is distinguished fromaccident in that the loss doesn't have to be sudden and fortuitous andcan result from continuous or repeated exposure which results in bodilyinjury or property damage neither expected not intended by the insured.

Risk Class—Risk class, in insurance underwriting, is a grouping ofinsureds with a similar level of risk. Typical underwritingclassifications are preferred, standard and substandard, smoking andnonsmoking, male and female.

Provided below (and in the attached drawings) is a description ofexemplary process flow and exemplary calculations illustrating exemplaryfunctionality of certain embodiments.

Sample Parties to a transaction:

-   -   A consumer with a convertible term life insurance policy;    -   Integrated Plan Designs LLC (“IPD”), an entity that administers        the program on behalf of a TLE Fund (“TLF”);    -   The TLF is an entity that provides funds to pay life insurance        premiums; and    -   Insurance Company.

Exemplary Steps in Transaction:

1) Insurance agent identifies individuals who are potential candidatesfor TLE.

2) Consumer (“prospect”) applies for TLE. TLE application includes copyof original term policy including original application, HIPAA form, andcurrent medical information (medical questionnaire).

3) A. Identification of conversion rights of policy and actual productinto which term policy is convertible.

 B. The change in health status between the time the original policy waswritten and currently.

 C. Combination of A+B is used to determine whether applicant is likelyto qualify for TLE.

4) If answer to 3 is “yes”, then process goes to underwriting. If answeris “no” case does not proceed further.

5) A. Medical Underwriting—Underwriter requests and receives the currentmedical records of the consumer for review to determine the current rateclass for the consumer.

 B. Policy Conversion Review—includes analysis of the insurance andexpense factors for these products to determine the overall cost offunding the conversion policy.

6) Pricing: Input New UW class+newly converted policy to design system.The model uses actuarial assumptions for mortality, expected rate ofreturn, issue expenses, annual maintenance fee the client will payduring the term extension period, current underwriting class andconversion policy costs to determine if the policy qualifies for TLE. Ifit qualifies, then the model is used to determine pricing for Option 1and Option 2.

In one embodiment, the calculation is as follows, using actuarialpresent values (APV), assumed mortality, and risk adjusted interestrate.

Term Extension Fee equals (A+B−C)/D, where:

A—APV of expected policy premiums paid into the conversion policy by theTLF

B—APV of issue and maintenance expenses of the TLF

C—APV of Death Benefits to the TLF

D—Life Annuity factor to amortize these costs over the term extensionperiod being offered.

Generally, option 1 and 2 rates will produce different risk adjustedinterest rates for each option. An example calculation performed for aset of exemplary data is described below.

7) IPD issues a proposal to the prospect for the term extension, withrates for Options 1 and 2.

8) Prospect decides whether to proceed and if so, selects one of the twooptions.

9) If accepted, the prospect (now client) executes documentsmemorializing the agreement including payment of first year's fee whichis held in escrow pending completion of the transaction.

10) Once signed, ownership of the policy is transferred to a Trust. Theterm policy is converted to the selected product, a collateralassignment is filed with the insurance company and the conversion policypremium is paid by the TLF.

11) The client is billed annually for the term extension fee.

12) If the insured dies during the term extension period, the TLF willreceive a portion of the death benefit of the life insurance policyequal to the premiums paid into the conversion policy. The remainder ofthe death benefit is paid to the designated beneficiaries.

13) If the insured lives to the end of the term extension period, thenthe following two options apply:

Option 1 (client has first right of refusal)

a. Client chooses to exercise that right, the client repays premiumspaid by the TLF and ownership and all rights to the policy aretransferred to the client.

b. Client declines to exercise that right, the right moves to the TLF:

-   -   i. If the TLF exercises right to retain policy, then full        ownership and all ownership rights are transferred to the TLF        and the amount of premium paid by the fund is deemed repaid.    -   ii. If the TLF also does not exercise the right, the life        insurance policy lapses and coverage is no longer available.

Option 2 (TLF has the first right of refusal)

a. TLF exercises that right and full ownership is moved to the TLF; thepremium advanced by the TLF is deemed repaid.

b. TLF does not exercise that right, the right reverts to the client:

-   -   i. If the client exercises the right to retain policy, then the        client repays all premiums paid by the TLF and ownership and all        rights to the life insurance policy are transferred to the        client.    -   ii. If the client also does not exercise the right, the life        insurance policy lapses and coverage is no longer available.

Option 1 allows the client to pay a level fee for the term extensionperiod (generally 5 to 10 years) and then at the end of the term, theclient has the first right of refusal to retain the policy.

Option 2 also allows the client to pay a level fee (lower than option 1)for the term extension period. However, the consumer does not have thefirst right of refusal to retain the policy.

To briefly summarize: TLE allows an insured to keep his/her lifeinsurance coverage at a cost that is more affordable than if the insuredconverted the policy directly with the current carrier.

A TLF will prepay the premiums required to keep a Permanent LifeInsurance Policy in force for a specific term of years (typically, 5-10)(the “Term Extension Period”) in exchange for an annual fee paid by theinsured to TLF. The repayment of the prepaid premium to TLF is securedby a collateral assignment recorded with the issuing carrier, and thepayment of the annual fee by the Insured is collateralized by the fulldeath benefit of the Permanent Life Insurance Policy.

If the insured dies while enrolled in the TLE program, the TLF will berepaid the full amount of the split dollar loan, and the insured'sbeneficiaries will receive the balance of the death benefit.

Depending on the option chosen at enrollment in the TLE program, at theexpiration of the Term Extension Period the loan will either be paid offand the insured's beneficiaries will receive the entire death benefitwhen the policy matures, or the Term Extension policy will be assignedto TLF and TLF will thereafter have the right to the entire deathbenefit.

Exemplary Detailed Example of a Calculation of Term Extension Fee

Definitions

x=Current age of insured

-   -   n=Term extension period    -   w=Assumed terminal age    -   DB=Death Benefit for conversion policy

Prem(t)=Conversion policy premium for year t. This is determined frominsurance carrier illustration software

-   -   i=assumed discount interest rate    -   Exp(t)=Assumed transaction expenses in year t

Actuarial Symbols Used

     Base  q(x) = Base  mortality  rate  for  age  x,      from  2008  VBT  mortality  table     Table = table  rating  based  on  underwriting  assessment.     Each  table  is  equal  to  25%  increase  in  base  mortality.     Imp = Amount  of  assumed  mortality  improvement  per  yearq(x + t) = base  q(t + t) * (1 + .25 * Table) * (1 − Imp)^(t − 1) = Assumed  mortality  rate  for  issue  age  x, duration  t     p(x) = l − q(x)      d(x) = l(x) * q(x)     l(x + l) = l(x) − d(x)      initial  l(x) = 1, 000, 000     D(x) = lx/(1 + i)^(t)      C(x) = d(x)/(1 + i)^(t + .5)$\mspace{79mu} {{M(x)} = {\sum\limits_{t = 1}^{w - x + 1}{C\left( {x + t - 1} \right)}}}$$\mspace{79mu} {{N(x)} = {\sum\limits_{t = 1}^{w - x + 1}{D\left( {x + t - 1} \right)}}}$

Formulas

     Term  Extension  Fee = (A + B = C)/D      Where:$\mspace{79mu} {A = {\left( {\sum\limits_{t = \varnothing}^{w - x}{{{Prem}(t)}*{D\left( {x + t - 1} \right)}}} \right)/{D(x)}}}$$\mspace{79mu} {B = {\left( {\sum\limits_{t = 1}^{w - x}{{{Exp}(t)}*{D\left( {x + t - 1} \right)}}} \right)/{D(x)}}}$C = [(Prem(1) + Prem(2)) * (M x − M(x + n)) + DB * M(x + n)]/D(x)     D = (N(x) − N(x + n))/D(x)

EXAMPLE

x=69

n=10

w=94 (25 years)

Table=3

Imp=0.01 (1% improvement)

i=0.12

Exp(1)=9%*Prem(1)

Exp(t)=1%*Prem(t) for t=2 to 25

See FIG. 12 for detailed values for A and B along with source figuresfor the other calculations shown below.

$C = {\frac{\left\lbrack {{\left( {{148,000} + 0} \right)*\left( {1936420 - 1020002} \right)} + {1,000,000*1020002}} \right\rbrack}{8928571} = {129,430.775}}$$\mspace{79mu} {D = {\frac{{66,255,712} - {12,430,823}}{8,928,571} = {{6.0}283879}}}$${{Term}\mspace{14mu} {Extension}\mspace{14mu} {Fee}} = {\frac{{188,483.74} - {129,430.775} + {22,822.55}}{{6.0}283879} = {{\$ 13},581.68}}$

Exemplary TLF

As noted above, most term life insurance policies have an option toconvert to

Permanent Life Insurance. Only an estimated 1% of insureds utilize thisvaluable option, largely due to the high cost of converting the policy.

TLF will prepay the premiums required to keep a permanent life insurancepolicy in force for a specific term of years (typically, 5-10) (the“Term Extension Period”) in exchange for an annual fee paid by theinsured to TLF. The repayment of the prepaid premium to TLF may besecured by a collateral assignment recorded with the issuing carrier,and the payment of the annual fee by the insured is collateralized bythe full death benefit of the permanent life insurance policy.

If the insured dies while enrolled in the TLE program, the TLF will berepaid the full amount of the split dollar loan, and the insured'sbeneficiaries will receive the balance of the death benefit.

More on Exemplary TLFs

Established to invest in fully-collateralized split dollar loansunderwritten by IPD.

-   -   Loans are collateralized by a collateral assignment filed with        and recorded in the insurance carrier's records. If the insured        life under a TLE policy dies during the Term Extension Period,        the insurance carrier will repay the amount of the split dollar        loan directly to TLF.    -   Only policies issued by insurance carriers rated A− or better by        A.M. Best at the time of issue will be included in the TLE        program.    -   Loans and collateral assignments will be held by the fund until        loans are repaid or expiration of the Term Extension Period.    -   Depending on the option chosen at enrollment in the TLE program,        at the expiration of the Term Extension Period the loan will        either be paid off and the insured's beneficiaries will receive        the entire death benefit when the policy matures, or the Term        Extension policy will be assigned to TLF and TLF will thereafter        have the right to the entire death benefit.    -   Exemplary budgeted capital requirements are $50 MM in Year 1 and        $100 MM in Year 2. Draws are expected to be quarterly.    -   Initial Size: US $150 mm (˜1200 policies), min $50 mm (˜400        policies) Year 1    -   Form: Pass Through SPV    -   Domicile: Ireland 110/Delaware LLC/Cayman LP    -   Legal Final Maturity: 25 years    -   Targeted Distributions: Quarterly commencing in Year 2    -   Drawdowns: Quarterly commencing on closing date    -   Targeted Base Case Returns: ˜11.4%*    -   Standard Deviation: ˜0.4%*    -   Collateral: Split Dollar Loans and a security interest in        Universal Life Insurance Policy (Carrier rated A− or better by        AM Best)    -   Base Management Fee: 2%    -   Hurdle: 8%    -   Performance Fee: 30%    -   Set Up Costs: $500,000    -   Placement Fees: 0-50 mm 3%, 50 mm-200 mm 2%, 1% thereafter    -   *Assumes $150 mm min TLF Size.

The models used as the basis for the targeted returns set forth in thisdescription are based on a number of assumptions, some of which arementioned and some of which are not.

Exemplary Collateral Terms

-   -   Prior to the expiration of the Term Extension Period, a        collateral assignment equal to the amount of the split dollar        loan recorded by the insurance carrier on a universal life        insurance policy insuring the life of the insured.    -   Post expiration of the Term Extension Period, or following an        event of default by the insured, the universal life insurance        policy on the life of the insured becomes an asset of the TLF.

TABLE 1 Some examples of differences between embodiments of TLE and LifeSettlements Life TLE Settlements Individual has the desire to KEEP theirlife YES NO insurance coverage at an affordable price. Individual hasthe desire to monetize the value NO YES of their life insurance policyfor an immediate cash payment. Mortality assumptions based onunderwriting YES NO techniques for populations, not individuals. Largepotential policy pool available as YES NO individuals currently havepolicies managed by life insurance agents. Agent commissions are paid bythe life YES NO insurance company. Upfront policy costs are highlydependent on NO YES market conditions at the time.

More on Underwriting

Underwriting allows insurance companies to classify risks andappropriately price insurance for each applicant. In the context of lifeinsurance, underwriting is the process of evaluating medical andnon-medical information about an individual and determining the effectthese factors statistically have on life expectancy. The process ofevaluation is referred to as risk classification. The initial processincludes not only a current health profile, but past medical history,familial health history, the person's occupation, habits such as smokingand alcohol use, hobbies, and even driving record. The goal is to obtaina clear picture of relevant risk factors.

Risk classification has been around since at least the 1700s. By thelate 1800s medical directors and actuaries began to collaborate andbuild mortality tables for common risk factors such as blood pressureand weight. By the early 1900s companies began to formulate ratingsbased on common substandard conditions.

In modern day underwriting, or risk classification, the underwriterreviews the application, medical and non-medical history, and makes adetermination as to whether issue an insurance policy at standard orpreferred rates, or with a rating, or to make a complete rejection.

Standard rates are given to individuals who pose an average risk andhave a normal life expectancy.

Preferred rates are offered to individuals whose sound health and lowrisk hobbies pose less than the average risk for the insurance companyand gives them a greater than normal life expectancy.

Rated life insurance policies are issued when the underwriter observesthat the applicant's health record demonstrates increased risk (such ashaving diabetes mellitus or having sustained a heart attack), whichreduces the person's life expectancy. The premiums are higher for ratedpolicies.

Finally, if the person has a serious illness, or a terminal illness,underwriting rules can require the policy to be rejected altogether. Byusing this approach, across hundreds of thousands of lives, the lifeinsurance industry has been able to establish ranges of expectedsurvival time for individuals who fall into their different tablecategories. This “law of large numbers” approach enables the insuranceindustry to predict future mortality or losses and is the basis formortality tables that display the incidence of death among certain agegroups of similar risks. If a person is reassessed at a later date, theunderwriter determines whether there is sufficient data to support thatindividual remaining in the same risk pool or being placed in adifferent risk pool category.

The underwriter's goal is to get as true a picture of the applicant'slifestyle as possible. For example, the underwriter may examine anyfactors (such as occupation, dangerous hobbies, etc.) that could makethe applicant more likely to die before his or her natural lifeexpectancy. While an underwriter cannot accurately predict how long anyone individual will live, by grouping together like individuals withsimilar risk factors, overall life expectancy can be reliablydetermined.

At the time of initial underwriting, one of the underwriter's primaryfunctions is to protect the insurance company as much as possibleagainst adverse selection (very poor risks) and those parties who mayhave fraudulent intent (anti-selection against the company.)

Adverse selection is said to exist when a risk (an individual) or groupof risks that are insured is more likely than the average correspondinggroup to experience a loss. This usually occurs when the individualdeliberately hides certain pertinent information from the insurer. Thisinformation may be of critical nature in underwriting the risk profileand determining the correct rate class or premium. For example, in arandomly-selected group of 1,000 25-year-old individuals, only two mightbe expected to die in any given year. However, the bulk of healthy25-year-old young adults do not typically regard the need to buy lifeinsurance. It is more likely that 25-year-olds who are ill or may beemployed in dangerous occupations will want to purchase insurance. Inthis setting, the underwriter's responsibility is to ensure that aninordinate number of these poorer-than-average risks aren't accepted orthe insurance company will lose money.

A simplified example of underwriting class selection is seen below inTable 2:

TABLE 2 Underwriting Criteria Best Class Preferred StandardPlus/Standard Health & Medical No health No health Some health Historyand impairments are impairments are impairments are Physical/Mentalallowed. No personal allowed. No personal allowed. Can have Impairmentshistory of history of personal history of cardiovascular cardiovasculardisease certain cardiovascular disease or diabetes. or diabetes.diseases or diabetes. Blood Pressure No current or past Currently wellCurrently well history of treatmentof controlled with current controlledwith current hypertension. Current and average readings in and averagereadings in and average readings the past two years not the past twoyears not in the past two years exceeding 150/90 exceeding: 150/90 - agehot exceeding 140/85. 45 and younger, 155/95 - ages 45-60, 159/95 - ages61 and over. Family Medical No cardiovascular No cardiovascularCardiovascular death of History disease or cancer in death of eitherparent no more than one parent either parent or any before age 60.before age 60. siblings before age 60. Personal Driving Cannot qualifyif 2 or Not available to No more than 2 moving History more movingapplicant if 2 or more violations in the past 3 violations in last 3moving violations in years. No record of DUI years, or if any DUI thelast 3 years except or reckless driving in in last 60 months. with flatextra, or if any the past 2 years. DUI in last 60 months. Use of Tobaccoor No tobacco use in the No tobacco use in the No tobacco use in theTobacco Products past 36 months. last 12 months. last 12 months. Historyof Cancer Insurance company Insurance company Available depending ondependent - only dependent - only type and duration of available oncertain available on certain cancer. types of skin cancer. types of skincancer. Cholesterol Levels may not Levels may not exceed Levels may notexceed Readings exceed 240. 250. 280. CHOL/HDL Ratio May not exceed 5.0.May not exceed 6.5. May not exceed 7.5. Substance or No history of Noabuse in past 10 No abuse in past 7 Alcohol Abuse substance or alcoholyears. years. abuse. Aviation Commercial airline Commercial airlineCommercial airline pilots accepted. pilots accepted. Private pilotsaccepted. Private Private pilots - may pilots- flat extra may pilots-flat extra may qualify with aviation apply depending on apply dependingon exclusion. experience. experience. Hazardous Available only if noAvailable; however, Available; however, Activities (i.e. flat extrapremium may have flat extra. may have flat extra. Skydiving, Hang wouldbe required. gliding, Rock climbing, Scuba diving etc) Residency- Mustbe a US resident Must be a US resident Must be a US resident Citizenshipfor past 3 years and for past 3 years and for past 2 years and either aUS citizen or either a US citizen or either a US citizen or havepermanent Visa have permanent Visa or have permanent Visa or or Greencard. Green card. Green card.

Exemplary Components of TLE Underwriting

Much of the initial risk assessment process in the life insuranceindustry and the senior settlement industry is similar. The evaluatorlooks for anything that promotes a longer life or that imparts alongevity risk. However, what that information means to the evaluatorand what is done with the data is often different.

Risk assessment in the senior settlement industry is different from theprocess used in the life insurance industry. Much of this is related tothe relatively smaller pool of individuals beingconsidered/underwritten. The Law of Large Numbers generally does nothold, thus the impact of any single life is far greater. In the seniorsettlement industry, the risk is that the insured may live too long.Attention must be given to advances in medical science that may lessenthe impact of any health conditions upon longevity. In addition, policyevaluators may consider an individual's financial status and access tohigh quality health and supportive care services.

In the life insurance industry, the risk is that the insured may die toosoon. Advances in health care work in this industry's favor. In primarymedical underwriting, longevity risk is automatically factored into theprocess of underwriting and individuals can be turned down if theypresent too great a risk. On the other hand, in the senior settlementindustry, investors frequently want to identify high health riskindividuals and are at risk of overemphasizing it.

Even more importantly, rather than respecting the concept of risk poolsand ranges of possible outcomes, the senior settlement industry isdriven by the pursuit of specific times of mortality, and basesinvestment strategy upon “median” life expectancy (LE).

The use of a median LE is problematic for a number of reasons. The firstis a statistical issue. Mortality/survival curves are typically notsmooth and do not readily follow parametric statistic patterns. Eventsare not as likely to occur on either side of the median or mean.

The second is that the risk modifying factors previously noted are usedto try to predict shifts in individual life expectancy by a specificnumber of years. Since the number of individuals demonstrating anysingle combination of health impairments is small, LE underwriters areconsistently trying to apply large number science to single individualcases.

Third, in senior settlement underwriting there is always the risk thatdebits associated with medical conditions which are not mutuallyexclusive (for instance hypertension and coronary artery disease) are“stacked” upon one another and that the resultant LE is erroneouslyshort.

Fourth, while there is a wealth of experiential data for settingmortality rates in the life insurance industry, this is not the case forsenior settlements. In the senior settlement industry, the profilesexamined are of elderly individuals who may have significant conditionsor multiple conditions that make them different from their healthiercohorts. One would think this would invariably lead to a shortened lifeexpectancy. However, there is a limited amount of data regarding howspecific diseases or groups of diseases affect longevity in the oldersenior groups.

Furthermore, the more healthful lifestyles of many seniors, access tonew medications and improved medical technology extends life, but in anunpredictable manner (some of the new interventions have not existedlong enough to generate meaningful data). Thus, relying upon traditionalcharts and tables for baselines and “established” debits and credits formany individuals may not be appropriate. For medically complex cases, inorder to “be in the ball park,” the underwriting team may follow aclinical/epidemiological model in which the most current publishedmedical data was consistently being assessed and incorporated into theirmodel. Even under the best of circumstances, and utilizing the highestdegree of medical scrutiny, this system falls back on trying to applygroup data to single cases.

In contrast, exemplary embodiments of the TLE approach to underwritingmay comprise a novel extension of the traditional underwriting used bythe insurance industry. As a result, the specific classification of eachindividual is methodologically similar to those used in major lifeinsurance companies today. As opposed to focusing on determination of aspecific life expectancy, an “underwriting class” may be established,which is used to price the cost of the term extension fee. Pricing isclosely linked to the underwriting class and is modulated by thespecific features of each individual convertible term policy.

In this exemplary TLE system, individual medical diagnoses are not asimportant as combinations of factors which can produce a change in riskpool/table status. The TLE system may be driven by the need to derivethe current underwriting class, and not to determine a single LE. TheTLE system advantageously segregates the medical analysis from thefinancial analysis.

A medical quality assurance process may include two separateprofessionals reviewing the medical data so that purported medicalconditions may be supported or refuted. The information required mayinclude the original insurance application/determination, a newapplication and medical questionnaire, a current prescription medicationlist, and medical records/lab work from the past 12 months.

Unlike the senior settlement industry, the TLE system determines whetherthere is sufficient evidence to induce a table shift, and does notattempt to second guess the insurance industry's life expectancypredictions. The goal is not to predict how many years a person willlive, but to determine whether the person would qualify for the sametable rating that was issued in the past.

Simply put, in an exemplary embodiment the TLE process seeks to comparethe current class and the original issue class. In order for anapplicant to become a candidate for the program, the comparison of theold and new findings needs to indicate that a table shift has occurred.

Unlike with the senior settlement industry, arbitrary debiting orcrediting is replaced by a system identifying a reliable change from anestablished baseline. The TLE approach has the ability to apply largenumber science and to amass larger groups of “like” individuals. Themodel also assumes a baseline table equivalent to 90% of 2008 VBT (seeTable 2 above). The 0.9 figure is based upon the actual experience ofover 3 million lives (underwritten as term insurance).

Exemplary embodiments of the TLE underwriting process, combined with anappropriate pricing model, provide an additional layer of investorprotection. The underwriter may utilize the provided data and establishan underwriting class. While the initial class determination may havebeen based upon the initial application, medical records (physician &hospital records), a physician exam, and blood/urine samples, in anexemplary embodiment the TLE underwriting is based upon the originalrecords, a new application, and current existing physician/hospitalrecords.

Since an exam does not take place and new lab measures may not beavailable, the TLE approach leads to a more conservative assumption ofhealth status. Furthermore, once a class has been determined, the TLEprotocol may require a “second look underwriting.”

In the “second look underwriting,” the TLE process may apply a secondlayer of scrutiny to further mitigate underwriting risk. This isimportant because the class determines the number of table arbitrages.In this step, the TLE system seeks to understand “how and why” theinsured has been placed in the specific class. Special attention may bepaid to conditions which can readily change (e.g., obesity) versus oneswhich are more fixed in nature (e.g., a documented surgical removal ofan organ) versus ones which may progress (e.g., diabetes with evidenceof disease complications). The system may seek to distinguish betweenhigher and lower risk candidates even within the same class. Adjustmentsto these subtle distinctions may be made in order to protect theinvestor.

Medical Underwriting QA

Quality assurance is a fundamental component of investor protection.Although a new physical exam may not be performed in most cases, anexemplary embodiment of the TLE system maintains high quality standardswhich enable the underwriting component to underwrite cases withpredictable results. Exemplary QA processes may include dataverification, high quality medical data analysis, expert application ofdata to insurance tables, and a second medical analysis to determinewhether there are clinical factors which potentially influence finaltable selection. High quality medical analysis may require a current andvalid medical data set. An exemplary QA process seeks to verify that therecords undergoing review accurately reflect an individual's healthstatus and that all important diagnostic information is included.

Corporate Compliance

Exemplary embodiments follow HIPAA guidelines. There preferably issecure electronic transmission of data between the TLE system andclients. The medical analysis preferably is done independently offinancial data. There preferably is restricted access to the data.

Concept of Medical Volatility

As noted above, not all medical conditions are “static.” For the medicalreviewer component, the following may be considered:

1. What is the potential for change in the identified medicalconditions?

2. Could the potential for change or acquisition of new data have ameaningful impact upon medical management and the individual'slongevity?

3. Is the volatility identified unidirectional versus bidirectional?

4. Why might circumstances improve?

5. Why might circumstances worsen?

6. Is there synergy or competition between the dynamic health and socialconditions?

For each case under review, the system may indicate which of thefollowing apply:

-   -   Unimpaired    -   Medically impaired, not meaningfully different from previous        underwriting    -   Medically impaired, key conditions likely to improve    -   Medically impaired, key conditions likely to behave as expected    -   Medically impaired, key conditions likely to worsen at        accelerated pace    -   Medically impaired, key conditions equally likely to improve or        deteriorate

This final layer of scrutiny not only enhances the precision of anexemplary underwriting process, it also confers an additional element ofinvestor protection.

Exemplary Underwriting Process Overview

-   -   Evaluation of an individual's medical and non-medical        information to assess the effect these factors have upon current        underwriting class.    -   Determination if the identified impairments constitute a        meaningful change in health risk status from prior underwriting.    -   Determination if the change in status constitutes a significant        enough decline (change in underwriting class) to create the        potential for meaningful arbitrage.

Prerequisites for Underwriting Review

Copy of existing term policy including original application and termconversion language

New TLE application including current medical questionnaire

Key Questions for Underwriting Team

Has there been a meaningful decline in health?

Step-Wise Approach—Pre-Qualification

Candidate healthy->process stops

Previously impaired but no decline in health status->process stops

Decline in health status->proceed to further evaluation anddetermination of whether candidate will qualify for TLE

Step-Wise Approach—Coarse Filter

Proceed to new underwriting

Obtain new medical data/APS

Obtain prescription records

Determine current underwriting class

Step-Wise Approach—Fine Filter

-   -   What is the potential for change in the identified medical        conditions?    -   Could the potential for change or acquisition of new data have a        meaningful impact upon medical management and the individual's        classification?    -   Might circumstances improve?->shift to lower risk class.    -   Might circumstances worsen?->shift to higher risk class.    -   Estimation of “volatility”->quantification of above results.

Distribution

An exemplary embodiment utilizes a unique distribution system tointegrate with the existing national life insurance distribution systemto offer TLE as a new sales opportunity and revenue source for agentsand general agents. See FIG. 8.

Exemplary Case Study

Goal: to extend life insurance coverage beyond expiration of currentterm insurance.

Current Situation:

Male—age 69

$1,000,000 10 year term policy, near expiration

Original policy issued Super Preferred (excellent health)

Current Health Table 3 (minor health problems)

Current Options: Insured's Perspective

(1) Convert to permanent universal life at original class: $32,800annually—no underwriting(2) Buy new 10 Year Term: $20,500 annually—full underwriting (noconversion right at end of term).

New Options: 10 Year TLE

(1) Option 1: $15,400 annually, insured has right to retain policy atthe end of the term extension period.

(2) Option 2: $10,000 annually, insured has no right to retain thepolicy.

Agent's Perspective

Agents have a new option to offer clients affordable life insurance.New source of revenue: $26,000 commission, regardless of option chosen.

Investor's Perspective

FIG. 9 depicts an exemplary percentage return to fund (TLF) on anindividual policy dependent upon the possible outcomes.

CONCLUSION

TLE offers 60-75 year olds (for example) the ability to keep theirvaluable life insurance at an affordable price.TLE is scalable. More than 18,000,000 people will turn 65 over the nextfive years. 8,000 policies builds a billion dollar TLF portfolio overfive years. There are approximately 400,000 licensed agents and generalagents in the United States.TLE targets an attractive, predictable return on investment—modeledaverage ˜11+% IRR with a ˜0.4% standard deviation at a $150 mm fundsize.

Modeled Stochastic Base Case Results of a hypothetical Fund Structure

Exemplary Assumptions

-   -   $150 Million Invested Capital    -   Mortality Based on 90% of 2008 VBT Table*    -   Underlying Portfolio—25 Year Legal Final    -   1.0% Mortality Improvement Years 1-25**    -   Insurance Company Current Premium Assumptions    -   5.0% Defaults Per Years 2-10    -   Results Based on 1,000 Monte Carlo Simulations of Mortality    -    *High Face Amount Mortality Study (Society of Actuaries April        2012).    -    Fully underwritten term life insurance policies (policies        $1,000,000 and over)        Total lives: 3 million        Face amount: 4.3 trillion        Average policy size: 1.43 million

Mortality Experience: 91%

-   -    ** Towers Watson—Global Mortality Improvement Experience and        Projection Techniques Study—June 2011

Average IRR 11.4% Standard Deviation 0.4% Maximum IRR 12.8% Minimum IRR10.1%

All returns are internal rates of return on pre-tax cash flow to theinvestor. No cost of capital is assumed.

FIGS. 1 and 2 depict exemplary modeled stochastic fund cashflows (basecase scenario).

FIGS. 3 and 4 depict exemplary modeled stochastic fund cashflows (100%default).

FIGS. 5 and 6 depict exemplary modeled stochastic fund cashflows (100%default, mortality improvement).

FIG. 7 depicts exemplary cumulative modeled stochastic fund cashflows(three scenarios).

TABLE 3 $1,000,000-$500,000,000 INVESTED CAPITAL No. of Scenarios 10001000 1000 1000 1000 1000 Total $1,000,000 $25,000,000 $50,000,000$150,000,000 $250,000,000 $500,000,000 Capital Approx. 8 185 370 1,1101,850 3,700 # of Cases Average −2.5% 10.9% 11.3% 11.4% 11.5% 11.5% Std.Dev. 7.9% 1.6% 0.7% 0.4% 0.3% 0.2% Max 8.9% 14.4% 13.5% 12.8% 12.5%12.4% Min −20.0% 2.7% 8.2% 10.1% 10.4% 10.7%Maximum negative return was set at −20% for modeling purposes.

Stress Tests

Analysis Of Projected Results—

Assumption Sensitivity Tests

TABLE 4 10% PREMIUM INCREASE - ALL YEARS Scenarios Avg. Avg. MaximumCapital Avg. Standard with a Loss Loss Loss (mil) IRR Dev. Loss (mil)Year (mil) $150 10.9% 0.4% 24 $1.5 10 $6.3

TABLE 5 100% DEFAULT IN YEAR 2 Scenarios Avg. Avg. Maximum Capital Avg.Standard with a Loss Loss Loss (mil) IRR Dev. Loss (mil) Year (mil) $15011.5% 0.6% 3 $0.6 2 $1.0

TABLE 6 20% MORTALITY IMPROVEMENT (72% 2008 VBT) Scenarios Avg. Avg.Maximum Capital Avg. Standard with a Loss Loss Loss (mil) IRR Dev. Loss(mil) Year (mil) $150 9.2% 0.5% 135 $2.0 10 $9.9

TABLE 7 2% p.a. MORTALITY IMPROVEMENT Scenarios Avg. Avg. MaximumCapital Avg. Standard with a Loss Loss Loss (mil) IRR Dev. Loss (mil)Year (mil) $150 10.1% 0.5% 38 $1.3 9 $7.6

TABLE 8 100% DEFAULT AND 20% MORTALITY IMPROVEMENT Scenarios Avg. Avg.Maximum Capital Avg. Standard with a Loss Loss Loss (mil) IRR Dev. Loss(mil) Year (mil) $150 8.7% 0.6% 70 $1.6 8 $4.8

At What Point is IRR Zero?

TABLE 9 BASE CASE WITH 45% MORTALITY (45% 2008 VBT) Scenarios Avg. Avg.Maximum Capital Avg. Standard with a Loss Loss Loss (mil) IRR Dev. Loss(mil) Year (mil) $150 5.1% 1.3% 1000 $20.0 9 $64.2

TABLE 10 WITH 100% RESERVE - ALL YEARS Adjusted Scenarios with Avg. LossMaximum Loss IRR a Loss (mil) (mil) 8.7% 70 $1.6 $4.8

MORTALITY EXAMPLES

TABLE 11 Life Expectancy (Age) BASE STRESSED EXTREME (90% 2008 (72% 200845% 2008 AGE VBT) VBT) VBT 60 Issued Class Super 95.5 102.7 105.9Preferred Arbitrage 5 Tables 84.0 86.7 89.8 66 Issued Class Preferred91.7 95.4 99.1 Arbitrage 4 Tables 85.1 87.2 90.3 68 Issued ClassPreferred 91.9 95.3 99.1 Arbitrage 4 Tables 85.6 87.4 90.6 69 IssuedClass Super 95.8 100.9 105.3 Preferred Arbitrage 5 Tables 85.8 87.6 90.7

Exemplary Distribution Process (Sales Work Flow)

Goal: To efficiently and profitably market and sell TLE through adedicated independent distribution network. The distribution systempreferably is designed to avoid conflicts of interest and to ensure thatagents and insureds understand and purchase TLE policies only whenappropriate.

Distributors may be independent businesses responsible for buildingtheir own structures. Distributors may have broad latitude in thestructure and operation of their business within the standards andguidelines set by IPD or an equivalent entity.

IPD may establish relationships with independent distributors who meetthe following criteria:

1. Are not directly licensed distributors or general agents for lifeinsurance companies.

2. Intend to market to existing distribution channels within the lifeinsurance industry (i.e., MGAs, GAs, IBDs, RIAs, P&C Agencies, lifeinsurance agents etc.)

3. Agree to sign and function under the terms of an IPD DistributionAgreement.

4. IPD will educate, train, and supervise the entities and their agentsabout TLE—product, target demographic, sales process.

IPD's distributors may be responsible for the following:

1. Serve as the intermediary between existing distribution channels andIPD.

2. Establish relationships with entities within the life insuranceindustry distribution system.

3. Educate, train, and supervise the entities and their agents aboutTLE—product, target demographic, sales process.

4. Oversee the sales process—applications, proposal and closing, asoutlined in the job description.

Exemplary IPD Distributor Job Description

1. Prospect—sign agreements

-   -   Entities—MGA, Captive GA, Carrier Direct, P&C, Life Settlement,        IBD/RIA . . .    -   Agents

2. Train

-   -   Entities    -   Agents

3. Sales

-   -   Applications—review for completeness and accuracy, and return to        IPD    -   Proposal—forward to entity/agent, review for completeness, and        return to IPD    -   Closing—forward to entity/agent, review for completeness, and        return to IPD

Exemplary Split Dollar Plan Design

Step 1: Qualify Prospect—goal is to determine whether prospect willqualify for TLE

-   -   A. Case set-up—data entry.    -   B. Medical Evaluation—establish preliminary underwriting class;        establish preliminary impairment level—if no impairment, case        does not qualify.    -   C. Product Evaluation.    -   D. System determines whether case goes to underwriting.

Step 2: Underwriting—goal is to provide the criteria necessary to priceTLE for the individual.

-   -   A. Primary Medical Underwriting—determine underwriting class.    -   B. Detailed Product Analysis—optimize policy design to identify        appropriate TLE product; reverse policy analysis software.

Step 3: Pricing—goal is to determine whether an offer is appropriate,and if so, actual pricing.

-   -   A. Secondary Medical Underwriting—validate underwriting class,        perform health analysis and medical quality assurance.    -   B. TLE pricing—determine Options 1 & 2 pricing

Step 4: Proposal Package—goal is to create and send to distributor a acomplete set of documentation needed to implement TLE for theagent/customer.

-   -   A. create closing package.

Split Dollar Plan Implementation—Closing

Step 1: Closing Package—if customer elects to proceed with TLE, goal isto receive from the customer/agent/distributor a complete set ofdocumentation needed to implement TLE.

-   -   A. Review the completed documentation for delivery to IPD.

Step 2: Closing Process—goal is for IPD to process all documentation andfacilitate all steps necessary to implement TLE:

-   -   A. Change of Ownership & Beneficiary forms (customer contributes        term policy)    -   B. Term Conversion Application (with term conversion premium if        required).    -   C. Split Dollar & Collateral Assignment Agreements.    -   D. Loan documents.    -   E. Universal Life Policy review    -   F. Initiate loan from TLF to Trustee    -   G. Send term conversion premium to Life Insurance Company (if        not sent in step B)    -   H. Forward Universal Life Policy to Trustee and receive delivery        receipt back from Trustee    -   I. TLE fee forwarded to TLF    -   J. Insurance Company commissions received by IPD    -   K. Compensation paid to Distributor

Step 3: Final Verification—goal is to verify that entire package hasbeen processed and recorded properly. Case then delivered to FundAdministrator for monthly reporting and cash distribution, periodic drawdowns, and receipt of death benefit as payoff and release of collateralassignment.

Further details of sales work flow and closing are depicted in FIGS. 13and 14, and provided in the description below. For clarity, implementingcomputer systems and components are not shown, but their presence andusage will be apparent to those skilled in the art.

Referring first to FIG. 13 (Sales Work Flow):

Step 1: Distribution/Pre-Contract—goal is to locate and process lifeinsurance policies for inclusion in a split-dollar TLE program.

An entity representing an off-shore Fund or equivalent entity maycontract with a U.S. entity (“TLE Agent”) set up for the purpose ofcoordinating the sourcing of TLE policies.

The TLE Agent may enter into a relationship with Integrated Plan DesignLLC (“IPD”) or equivalent entity to oversee and manage sourcing of TLEpolicies via independent distributors (each, a “Distributor”). TheDistributors may enter into producer agreements with independentinsurance Agents/GAs (each, an “Agent”).

Agents may locate new or existing clients (each, a “Customer”) in needof a TLE product. The Agents may assist Customers with completion andexecution of a TLE application (an “Application”), which may then besubmitted to a Distributor. In an embodiment, this submission is madeelectronically, between a Customer computer/server and an Agent orDistributor computer/server.

As part of the application process, the Customer may select eitherOption 1 (the Customer pays a higher split-dollar fee and has a right tokeep the policy at the end of the term) or Option 2 (Customer pays alower split-dollar fee and the Fund has the right to keep the policy atthe end of the term).

The Distributor may review the Application for completeness andappropriateness for the TLE program. If the Distributor determines thatthe Application is appropriate for the TLE program, the Application maybe submitted to IPD for review and pricing. In an embodiment, thissubmission is made electronically.

If IPD determines that the Application is appropriate for the TLEprogram, it may price the TLE product for the Customer and extend theoffer based on the option chosen by the Customer.

Upon acceptance of the offer by the Customer, IPD may prepare a TLEclosing package. A Trustee may be engaged to serve as the trustee of atrust that will own the TLE policy.

Referring to FIG. 14:

Step 2: Closing Package—goal is to give the Customer and Agent acomplete set of all documents (closing package) needed to participate inthe TLE program.

The closing package may include grantor trust formation documents, termconversion application, term conversion illustration, change ofownership/beneficiary form, collateral assignment, split dollar feeagreement, loan documents and receipt for payment of first year'ssplit-dollar service fee.

The closing package may then go to a Distributor, then to the Customerfor completion with the assistance of the Agent. In an embodiment, theclosing package is transmitted electronically.

Once completed, the closing package, along with the first year'ssplit-dollar fee, will be returned to the Distributor and on to IPD.

Step 3: Closing Process—goal is to process all paperwork necessary toenroll a Customer in the TLE program.

A Trustee may sign the trust agreement, the split-dollar financingagreement, Loan documents (if not included in Split Dollar Agreement)and collateral assignment. Change of ownership/beneficiary forms,conversion application, conversion illustration, and any other requireddocuments may be submitted to a converting/issuing carrier (LifeInsurance Company). Upon conversion, the TLE policy may be sent by thecarrier to IPD. In an embodiment, the documents are created andtransmitted electronically.

The TLE Agent may sign the collateral assignment. IPD may deliver theTLE policy to the Trustee and get a signed delivery receipt for the TLEpolicy from the Trustee.

The Fund may execute the split dollar financing agreement between theFund and the trust. The Fund may issue a check or make an electronicpayment to the carrier for the funds to cover the conversion of thepolicy into a universal life policy, and the amount of premium to keepthe policy in force for the term of the extension period.

IPD may submit a conversion and premium check or make an electronicpayment, along with the collateral assignment to the issuing carrier forprocessing. This may begin a “Free Look” period. The Fund may cut aseparate check or make an electronic payment to IPD for its fee inprocessing the transaction.

After recordation, the insurance carrier may send confirmation that thecollateral assignment has been filed and accepted.

Step 4: Final Verification—goal is to verify that the entire the closingpackage has been processed and properly recorded.

A fully executed document package may be sent to each of the involvedentities (insured, Distributor, Trustee, Fund (Fund administrator).

After appropriate seasoning, the loan and all other TLE programdocuments may be sold and assigned by the TLE Agent to the Fund.

Exemplary Alternative Split Dollar Plan (TLE) Implementation

FIG. 10 provides a flow diagram of steps and components of an exemplaryembodiment. For clarity, implementing computer systems and componentsare not shown, but their presence and usage will be apparent to thoseskilled in the art.

Step 1: Distribution/Pre-Contract—goal is to locate and process lifeinsurance policies for inclusion in the split-dollar TLE program.

An entity representing the off-shore fund (the “TLF”) may contract witha U.S. entity (the “TLE Agent”) set up for the purpose of coordinatingthe sourcing of TLE policies.

The TLE Agent may enter into a relationship with an entity (shown hereas IPD) set up to oversee and manage the sourcing of TLE policies viaindependent distributors (“Distribution Network”).

The distributors may enter into producer agreements with independentinsurance producers (each, a “Producer”). Producers will locate new orexisting clients (each, a “Customer”) in need of the TLE product.

The Producers will assist Clients with completion and execution of theTLE application (an “Application”), which will then be submitted to aDistributor.

As part of the application process, the Client will select whether theywant Option 1 (the Client pays higher split-dollar fee and has right tokeep policy at the end of the term) or Option 2 (Client pays lowersplit-dollar fee and the TLF has the right to keep the policy at the endof the term).

The Distributor will review the Application for completeness andappropriateness for the TLE program.

If the Distributor determines the Application is appropriate for the TLEprogram, it will be submitted to IPD for review and pricing.

If IPD determines the Application is appropriate for the TLE program, itwill price the TLE product for the Client and extend the offer based onthe option chosen by the Client.

Upon acceptance of the offer, IPD will prepare the TLE closing package.

A trustee (the “Trustee”) will be engaged to serve as the trustee of thetrusts that will own the TLE policies.

Step 2: Closing Package—goal is to give the insured and Producer acomplete set of all documents needed to participate in the TLE program.

Prepare the necessary documentation for the Client to enroll in the TLEprogram.

The closing package will include grantor trust (e.g., Georgia) formationdocuments, term conversion application, term conversion illustration,change of ownership/beneficiary form, collateral assignment, splitdollar fee agreement, Loan documents (if not included in Split DollarAgreement) and receipt for payment of first year's split-dollar servicefee.

The closing package will then go to a Distributor, then to the Clientfor completion with the assistance of the Producer.

Once completed, the closing package, along with the first year'ssplit-dollar fee, will be returned to the Distributor and on to IPD.

Step 3: Closing Process—goal is to process all paperwork necessary toenroll a Client in the TLE program.

Trustee signs the trust agreement, the split-dollar financing agreement,Loan documents (if not included in Split Dollar Agreement) andcollateral assignment.

The change of ownership/beneficiary forms, conversion application,conversion illustration, and any other required documents will besubmitted to the converting/issuing carrier.

Upon conversion, the TLE policy will be sent by the carrier to IPD.

The TLE Agent will sign the collateral assignment and note purchase andsale agreement.

IPD will deliver the TLE policy to the Trustee and get a signed deliveryreceipt for the TLE policy from the Trustee.

The TLF will execute the split dollar financing agreement between theTLF and the trust.

The TLF will issue a check to the carrier for the funds to cover theconversion of the policy into a universal life policy, and the amount ofpremium to keep the policy in force for the term of the extensionperiod.

IPD will submit the conversion and premium check, along with thecollateral assignment to the issuing carrier for processing. This willbegin the “Free Look” period. The TLF will cut a separate check to IPDfor its fee in processing the transaction.

After recordation, the insurance carrier will send confirmation that thecollateral assignment has been filed and accepted.

Step 4: Final Verification—goal is to verify that the entire the closingpackage has been processed and properly recorded.

A fully executed document package will be sent to each of the involvedentities (insured, Distributor, Trustee, TLF (TLF administrator).

Step 5: Administration of Loans and the TLF

The TLF manager will receive split-dollar fees and administer thesplit-dollar loans until expiration of the TLE program term.

If the insured life under the policy passes during the term, pursuant tothe collateral assignment, the TLF will receive repayment of theprincipal of the split-dollar loan directly from the Insurance Company,and the remaining death benefit will be paid to the Trust fordistribution to the beneficiaries named by the Client.

If the insured life does not pass during the term, then at expiration ofthe term if the Client chose Option 1 the Client can repay the principalof the split-dollar loan and keep the policy. In this event, the Trusteewill resign and the Client will appoint his or her own trustee. In theevent the Client repays the split-dollar loan, the TLF will have nofurther rights in or to the policy. If the Client does not repay theloan, then the TLF will have the right to assume ownership of the policyand the Trustee will change the beneficiaries of the trust from thosechosen by the Client to the TLF.

If the Client chose Option 2, then at the end of the term the TLF hasthe right to keep the policy. If the TLF chooses to keep the Policy, thebeneficiary of the trust will be changed to the TLF.

In the event the TLF becomes the beneficiary of the trust, upon thepassing of the insured life under the policy, the death benefit will bepaid to the trust and distributed to the TLF as the trust beneficiary.

For ease of administration, after the expiration of the term of allsplit-dollar loans, the ownership and beneficiary of all policies whichreverted to the fund can be changed from the Trust to the TLF by filingchange of ownership and change of beneficiary forms with the issuinginsurance carrier.

It will be understood by those skilled in the art that each of the abovesteps will comprise computer-implemented aspects, performed by one ormore of the computer components described herein. For example,communications, billings, and payments may be performed electronically.Calculation of fees (e.g., a term extension fees for an insured) may beperformed electronically. Calculations related to life expectancy may beperformed electronically. Stochastic modeling may be performedelectronically. In at least one exemplary embodiment, all steps may beperformed electronically—either by general or special purpose processorsimplemented in one or more computer systems such as those describedherein.

It will be further understood and appreciated by one of ordinary skillin the art that the specific embodiments and examples of the presentdisclosure are presented for illustrative purposes only, and are notintended to limit the scope of the disclosure in any way.

Accordingly, it will be understood that various embodiments of thepresent system described herein are generally implemented as a specialpurpose or general-purpose computer including various computer hardwareas discussed in greater detail below. Embodiments within the scope ofthe present invention also include computer-readable media for carryingor having computer-executable instructions or data structures storedthereon. Such computer-readable media can be any available media whichcan be accessed by a general purpose or special purpose computer, ordownloadable through communication networks. By way of example, and notlimitation, such computer-readable media can comprise physical storagemedia such as RAM, ROM, flash memory, EEPROM, CD-ROM, DVD, or otheroptical disk storage, magnetic disk storage or other magnetic storagedevices, any type of removable non-volatile memories such as securedigital (SD), flash memory, memory stick etc., or any other medium whichcan be used to carry or store computer program code in the form ofcomputer-executable instructions or data structures and which can beaccessed by a general purpose or special purpose computer, or a mobiledevice.

When information is transferred or provided over a network or anothercommunications connection (either hardwired, wireless, or a combinationof hardwired or wireless) to a computer, the computer properly views theconnection as a computer-readable medium. Thus, any such a connection isproperly termed and considered a computer-readable medium. Combinationsof the above should also be included within the scope ofcomputer-readable media. Computer-executable instructions comprise, forexample, instructions and data which cause a general purpose computer,special purpose computer, or special purpose processing device such as amobile device processor to perform one specific function or a group offunctions.

Those skilled in the art will understand the features and aspects of asuitable computing environment in which aspects of the invention may beimplemented. Although not required, the inventions are described in thegeneral context of computer-executable instructions, such as programmodules or engines, as described earlier, being executed by computers innetworked environments. Such program modules are often reflected andillustrated by flow charts, sequence diagrams, exemplary screendisplays, and other techniques used by those skilled in the art tocommunicate how to make and use such computer program modules.Generally, program modules include routines, programs, objects,components, data structures, etc. that perform particular tasks orimplement particular abstract data types, within the computer.Computer-executable instructions, associated data structures, andprogram modules represent examples of the program code for executingsteps of the methods disclosed herein. The particular sequence of suchexecutable instructions or associated data structures represent examplesof corresponding acts for implementing the functions described in suchsteps.

Those skilled in the art will also appreciate that the invention may bepracticed in network computing environments with many types of computersystem configurations, including personal computers, hand-held devices,multi-processor systems, microprocessor-based or programmable consumerelectronics, networked PCs, minicomputers, mainframe computers, and thelike. The invention is practiced in distributed computing environmentswhere tasks are performed by local and remote processing devices thatare linked (either by hardwired links, wireless links, or by acombination of hardwired or wireless links) through a communicationsnetwork. In a distributed computing environment, program modules may belocated in both local and remote memory storage devices.

An exemplary system for implementing the inventions, which is notillustrated, includes a general purpose computing device in the form ofa conventional computer, including a processing unit, a system memory,and a system bus that couples various system components including thesystem memory to the processing unit. The computer will typicallyinclude one or more magnetic hard disk drives (also called “data stores”or “data storage” or other names) for reading from and writing to. Thedrives and their associated computer-readable media provide nonvolatilestorage of computer-executable instructions, data structures, programmodules, and other data for the computer. Although the exemplaryenvironment described herein employs a magnetic hard disk, a removablemagnetic disk, removable optical disks, other types of computer readablemedia for storing data can be used, including magnetic cassettes, flashmemory cards, digital video disks (DVDs), Bernoulli cartridges, RAMs,ROMs, and the like.

Computer program code that implements most of the functionalitydescribed herein typically comprises one or more program modules may bestored on the hard disk or other storage medium. This program code, asis known to those skilled in the art, usually includes an operatingsystem, one or more application programs, other program modules, andprogram data. A user may enter commands and information into thecomputer through keyboard, pointing device, a script containing computerprogram code written in a scripting language or other input devices (notshown), such as a microphone, etc. These and other input devices areoften connected to the processing unit through known electrical,optical, or wireless connections.

The main computer that effects many aspects of the inventions willtypically operate in a networked environment using logical connectionsto one or more remote computers or data sources, which are describedfurther below. Remote computers may be another personal computer, aserver, a router, a network PC, a peer device or other common networknode, and typically include many or all of the elements described aboverelative to the main computer system in which the inventions areembodied. The logical connections between computers include a local areanetwork (LAN), a wide area network (WAN), and wireless LANs (WLAN) thatare presented here by way of example and not limitation. Such networkingenvironments are commonplace in office-wide or enterprise-wide computernetworks, intranets and the Internet.

When used in a LAN or WLAN networking environment, the main computersystem implementing aspects of the invention is connected to the localnetwork through a network interface or adapter. When used in a WAN orWLAN networking environment, the computer may include a modem, awireless link, or other means for establishing communications over thewide area network, such as the Internet. In a networked environment,program modules depicted relative to the computer, or portions thereof,may be stored in a remote memory storage device. It will be appreciatedthat the network connections described or shown are exemplary and othermeans of establishing communications over wide area networks or theInternet may be used.

An exemplary such system is depicted in FIG. 11. Computers 100communicate via network 110 with a server 130. A plurality of sources ofdata 120-121 also communicate via network 110 with a server 130,processor 150, and/or other components operable to calculate and/ortransmit information. Server(s) 130 may be coupled to one or morestorage devices 140, one or more processors 150, and software 160.

Calculations described herein, and equivalents, are, in an embodiment,performed entirely electronically. Other components and combinations ofcomponents may also be used to support processing data or othercalculations described herein as will be evident to one of skill in theart. Server 130 may facilitate communication of data from a storagedevice 140 to and from processor(s) 150, and communications to computers100. Processor 150 may optionally include or communicate with local ornetworked storage (not shown) which may be used to store temporary orother information. Software 160 can be installed locally at a computer100, processor 150 and/or centrally supported for facilitatingcalculations and applications.

In view of the foregoing detailed description of preferred embodimentsof the present invention, it readily will be understood by those personsskilled in the art that the present invention is susceptible to broadutility and application. While various aspects have been described inthe context of a preferred embodiment, additional aspects, features, andmethodologies of the present invention will be readily discernible fromthe description herein, by those of ordinary skill in the art. Manyembodiments and adaptations of the present invention other than thoseherein described, as well as many variations, modifications, andequivalent arrangements and methodologies, will be apparent from orreasonably suggested by the present invention and the foregoingdescription thereof, without departing from the substance or scope ofthe present invention. Furthermore, any sequence(s) and/or temporalorder of steps of various processes described and claimed herein arethose considered to be the best mode contemplated for carrying out thepresent invention. It should also be understood that, although steps ofvarious processes may be shown and described as being in a preferredsequence or temporal order, the steps of any such processes are notlimited to being carried out in any particular sequence or order, absenta specific indication of such to achieve a particular intended result.In most cases, the steps of such processes may be carried out in avariety of different sequences and orders, while still falling withinthe scope of the present inventions. In addition, some steps may becarried out simultaneously.

The foregoing description of the exemplary embodiments has beenpresented only for the purposes of illustration and description and isnot intended to be exhaustive or to limit the inventions to the preciseforms disclosed. Many modifications and variations are possible in lightof the above teaching.

The embodiments were chosen and described in order to explain theprinciples of the inventions and their practical application so as toenable others skilled in the art to utilize the inventions and variousembodiments and with various modifications as are suited to theparticular use contemplated. Alternative embodiments will becomeapparent to those skilled in the art to which the present inventionspertain without departing from their spirit and scope. Accordingly, thescope of the present inventions is defined by the appended claims ratherthan the foregoing description and the exemplary embodiments describedtherein.

While certain exemplary aspects and embodiments have been describedherein, many alternatives, modifications, and variations will beapparent to those skilled in the art. Accordingly, exemplary aspects andembodiments set forth herein are intended to be illustrative, notlimiting. Various modifications may be made without departing from thespirit and scope of the disclosure.

1. An automated computer system comprising: at least one processor, andat least one non-transitory memory storing a computer executableinstructions, which when executed by the at least one processor, causessaid processor to operate as: (a) a receiving component, configured toreceive electronic application data for converting a convertible termlife insurance policy of a policy owner into a permanent life insurancepolicy with an insurance company; (b) an underwriting component,configured to automatically analyze the received electronic applicationdata and determine whether the owner is a qualified customer for theconversion; (c) a pricing component, configured to automatically analyzeand determine the one or more pricing and costs requirements; (d) aselection component, configured to select and analyze at least onepermanent life insurance policy of the third party based at leastpartially on the determination of the underwriting component and thedetermination of the pricing component; (d) a processing component,configured to facilitate conversion of the owner's convertible term lifeinsurance policy into the permanent life insurance policy of the thirdparty; and (e) a generating component, configured to automaticallygenerate an agreement to be executed between a third party and thepolicy owner, wherein the generated agreement comprises a plurality ofcontractual obligations between the third party and the owner for aspecified period of time.
 2. The system of claim 1, wherein the systemperforms an iterative computerized selection of a permanent lifeinsurance policy, financed at least in part by a third party, based onthe plurality of the determined customer qualifications and furthertaking into account one or more pricing and cost requirements determinedby the pricing component.
 3. The system of claim 1, wherein thedetermination by the underwriting component comprises an identificationof conversion rights in the owner's convertible term life insurance anda determination of the permanent life insurance policy into which theconvertible term life insurance may be converted.
 4. The system of claim1, wherein the determination by the underwriting and the pricingcomponent comprises an automated iterative analysis of a mortalityassumptions and the one or more pricing and costs requirements.
 5. Thecomputer system of claim 1, wherein the determination by theunderwriting component further comprises a comparison of a past andcurrent underwriter issue or risk class for the owner policy, and adetermination whether there has been a shift in the issue or risk classfor the policy owner.
 6. The computer system of claim 1, wherein thedetermination by the underwriting component further comprises ananalysis of a past and present health status of at least one personspecified in the owner policy.
 7. The system of claim 1, wherein theselection by the selection component selects at least one permanent lifeinsurance policy of the third party that best fits the determinedcustomer qualifications and further based on the determination of one ormore pricing and cost requirements of the pricing component for theselected life insurance policy.
 8. The computer system of claim 1,wherein the determination by the pricing component comprises anautomated iterative analysis of an expected rate of return for eachpermanent life insurance policy that fits a plurality of the determinedcustomer qualifications and one or more pricing and cost requirements.9. The computer system of claim 1, wherein the determination of one ormore pricing and costs requirements comprise a calculation of an issueexpense, a calculation of a policy conversion costs, and a determinationof a maintenance fees amount that the policy owner agrees to pay. 10.The system of claim 1, wherein the generating component generates theagreement with a plurality of contractual obligations comprising: afirst obligation in which the third party is obligated to pay premiumsfor the permanent life insurance policy to the insurance company thatthe owner is otherwise obligated to pay; a second obligation in whichthe owner is obligated to pay one or more fees to the third party; anassignment to one of the owner or the third party a first right toretain the permanent life insurance policy upon expiration of thespecified period of time, and a calculation of fees that the owner isobligated to pay to the third party.
 11. The computer system of claim10, wherein the fees that the owner is obligated to pay to the thirdparty are calculated at least partially as a sum of (a) a cash flowvalue, the cash flow value being a lower numeric value in a case wherethe first right is assigned to the third party than in a case where thefirst right is assigned to the owner, (b) expected premiums to be paidby the third party, and (c) expenses to be occurred by the third partyin relation to the permanent life insurance policy, less (d) deathbenefits of the permanent life insurance policy.
 12. The computer systemof claim 10, wherein the contractual obligations between the third partyand the owner for a specified period of time include a right of firstrefusal, exercisable by either the policy owner or the third party. 13.The computer system of claim 12, wherein in order to exercise said rightof first refusal, the policy owner is required to repay premiums paid bythe third party, and the assignment of the first right to retain thepermanent life insurance policy is executed for the benefit of thepolicy owner upon repayment of the premiums.
 14. The computer system ofclaim 13, wherein the repayment of the premiums is secured by acollateral assignment recorded with said insurance company, and paymentof the fees to the third party is collateralized by a death benefit ofthe insurance policy.
 15. The computer system of claim 12, wherein whenthe third party exercises the first refusal right, then the assignmentis executed for the benefit of the third party and the premiums paid bythe third party for the policy owner are deemed repaid.
 16. The computersystem as in claim 10, wherein if the policy owner dies during a term oran extension period of the insurance policy, while the required premiumsare paid by the third party, the third party is repaid the amount of thepremiums paid from a death benefit of the insurance policy, and theowner's designated beneficiaries receive at least a portion of thebalance of the death benefit.
 17. A computer system as in claim 1,wherein the permanent life insurance policy is issued through a splitdollar program.
 18. A computerized method for automatically facilitatinga conversion of an insurance policy, said method comprising: (a)receiving electronic application data for converting a convertible termlife insurance policy of a policy owner into a permanent life insurancepolicy with an insurance company; (b) automatically analyzing thereceived electronic application data and determining whether the owneris a qualified customer for the conversion; (c) automatically analyzingand determining the one or more pricing and costs requirements for oneor more life insurance policy; (d) selecting and analyzing at least onepermanent life insurance policy of the third party based at leastpartially on the determination whether the owner is a qualified customerfor the conversion and based at least partially on the determination ofone or more pricing and costs requirements; (e) automatically generatingan agreement to be executed between a third party and the policy owner,wherein the generated agreement comprises a plurality of contractualobligations between the third party and the owner for a specified periodof time.
 19. The method of claim 18, further comprising: (f) executingthe agreements for the conversion of the owner's convertible term lifeinsurance policy into at least one permanent insurance policy of thethird party.
 20. A computerized method for automatically generatingagreements for conversion of an insurance policy, said methodcomprising: (a) transmitting electronic application data for convertinga convertible term life insurance policy of a policy owner into apermanent life insurance policy with an insurance company; (b)performing automated analysis on the transmitted electronic applicationdata and determining whether the owner is a qualified customer for theconversion; (c) performing automated analysis on the transmittedelectronic application data and determining the one or more pricing andcosts requirements for the conversion of one or more life insurancepolicy; (d) selecting and analyzing at least one permanent lifeinsurance policy of the party based at least partially on thedetermination whether the owner is a qualified customer for theconversion and based at least partially on the determination of one ormore pricing and costs requirements; (e) automatically generating anagreement to be executed between a third party and the policy owner,wherein the generated agreement comprises a plurality of contractualobligations between the third party and the owner for a specified periodof time; (f) transmitting the generated agreement to the owner of theowner of the convertible term life insurance policy and at least onethird party for execution.